MDC Partners Inc. (NASDAQ:MDCA) Q3 2018 Earnings Conference Call Transcript

Oct 29, 2018 • 08:30 am ET

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MDC Partners Inc. (NASDAQ:MDCA) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the MDC Partners Third Quarter Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Alex Delanghe. Please go ahead.

Executive
Alexandra Delanghe

Thank you. Good morning, everyone. I'd like to thank you for taking the time to listen to the MDC Partners conference call for the third quarter of 2018. Joining me today from MDC are David Doft, CFO; David Ross, EVP of Strategy and Corporate Development; and Stephanie Nerlich, EVP of Partner Development and Talent.

(Forward-Looking Cautionary Statements)

For your reference, we've posted an investor presentation to our website. We also refer you to this morning's press release and slide presentation for definition, explanations and reconciliations of non-GAAP financial data.

And now to start the call, I'd like to turn it over to over CFO, David Doft.

Executive
David Doft

Thank you, Alex, and good morning, everyone. I'm going to keep my comments brief, focusing on three specific topics. A review of third quarter financial results, actions we are taking to address our cost structure and recent strategic announcements.

Before I get to that, I want you to know that we are working diligently to improve our company's performance, particularly in cost reductions and renewed investment in new business acquisitions. Number one, we are focused on new business and have invested in senior business development and creative talent at several agencies, which is paying off with expanded new business prospects in the pipeline. Number two, it is important to note that our agency brands continue to be in demand in the marketplace and the underperformance of a few firms does not diminish our overall future opportunity. Number three, we have made significant progress in reducing the cost structure across several units, over $50 million annualized which sets us up for an earnings recovery in 2019.

Number four, we remain focused on creating shareholder value and have hired LionTree Advisors and JPMorgan to advise us on a review of strategic alternatives. In addition, we have launched a search for a new CEO, led by SpencerStuart. In summary, we have attained excellent cost reductions and have refocused on attaining new business wins.

Third quarter results are as follows. Organic revenue growth in the quarter was up 1.5%. This growth was favorably impacted by a 190 basis point increase in billable pass-through costs in Q3 incurred on clients' behalf from certain of our partner firms acting as principal. This is an improving trend from the first half's organic revenue decline, as we cycled past a more difficult year-over-year comparison in Q2, combined with net new business wins of $13 million in Q3. Notable wins include match.com, Church & Dwight's Trojan and MillerCoors' Leinenkugel. Gross wins totaled $49 million, offset by $36 million of losses. We expect to achieve positive organic revenue growth for the remainder of 2018 and finish the year